The newest threat to innovation in the U.S. is the increasingly local technology regulations. Small start-ups are increasingly have to work with dozens (and often hundreds) of regulators — and that means they will have to raise much more capital and slow their offerings to market.

It is now the fashion for individual states (and often counties and cities) to each institute their own and wildly different types of regulation on technology companies. The immense technology giants have the resources to deal with regulatory minutiae (in fact, they welcome the complex regulations because it further entrenches their power).

It is not regulation, per se, that hurts innovation. It is competing (and often contradictory regulation) that impedes regulation.

Most of technology has traditionally been regulated at a federal level.

In the last two years, we have seen a upsurge in local control, local regulations, and more. (This is going to significantly slow efforts of tech companies.)

Historically, most technology has traditionally been regulated at a federal level.

But many markets outside of technology (from auto sales to car insurance) have been regulated by states … and some even by cities (think of zoning laws, rent controls, sales tax, and more).

For instance, markets like insurance have traditionally been regulated at the state level; those 50 insurance regulators make innovation very difficult because firms essentially have to create 50 different products — one for each state. In addition, insurance firms have to spend a large part of their time lobbying legislatures and worrying about upcoming elections that could be a systemic risk to their business. The productivity growth for insurance therefore is much lower than one would expect with software.

The same is true for cable companies, which were regulated at the city level and have to operate in thousands of different jurisdictions (some overlapping) within the U.S. This makes serving customers very difficult and is one of the reasons cable companies have had historically low customer satisfaction and low Net Promoter Scores.

Another thing that comes with regulation is corruption — especially at the state and local level. Many cities and states have endemic corruption problems because so much is riding on creating a law that benefits one company (or industry) over another. That type of corruption is much less likely at a federal level because the stakes are bigger and thus is much more scrutinized.

The internet is a fresh landscape where productivity growth is accelerating — partially due to the fact that most of the regulations have been federal. The tempo attracts smarter people who want to work on harder problems and not be curtailed by bureaucracy.

Bezos believes that you should be able to feed your team with just two pizzas

“Crazy thought experiment: Imagine a new type of company that decided to only do what it was really good at and essentially outsourced everything else.”

Because revenues of private companies tend to be secret, most venture-backed companies have historically bragged about how many employees they have. A CEO will say: “we went from 100 to 200 employees last year” as if fast employee growth is always a good thing.

But this is changing: there is a new status game brewing between companies concerning who has the fewest number of employees, centered around who is engineering greater amounts output with less staff. Indeed, the freedom to iterate quickly is status. More resources along with lower headcount means that they can dominate new markets. This is because they are tripling down on their strengths.

In the future, those who achieve the greatest results with the least number of employees will be admired above all others; the key statistic to look at is the go-forward net revenues per employee because it best encompasses the company’s leverage. What matters is each employee’s productivity and how the business itself can scale?

revenue per employee is an important metric to understand over time.

companies with flat revenue/employees over years (which is the case in many tech companies) often mean that the company is not run very well and does not have a ton of leverage.

This statistic doesn’t just ring true for the technology space, rather any business should be aiming to maximize that metric. By doing so, every employee feels and acts like Warren Buffet; they’re investing their capital (time and skill) into the company. Every good CEO should be spending time trying to increase their employees’ productivity, which is the strongest form of leverage the company retains.

Since publishing yesterday, I got a ton of inbound from other CEOs and founders talking about what they do and also asking about how we do things at SafeGraph. We still have a ways to go at SafeGraph to be great at Exit Transparency (it is very aspirational) but we have made a lot of strides to be better at it.

Exit Transparency is about starting employment with the end in mind. When the employee eventually leaves the company (as all employees eventually do), what do they want to achieve and how to they want to grow.

Much of mainstream wellness advice revolves around creating a “balanced life.” There are phrases like “work-life balance,” “balanced diet”, and “balance of power.” All of these are considered positive culturally and worth striving for.

When it comes to balance in your own life, though, this advice can lead one astray. A life worth living is making choices — which means each person is going to weigh things differently. “Balance” implies that you need at least a decent amount of everything … but the reality is that you need to clearly make choices on important things that you are going to skimp on.

I’ve met a lot of people in my life. I’ve never met one that was “balanced.” Everyone, absolutely everyone, is weighted in the areas they care more about. That’s natural. That’s good.

Having a "balanced" life is impossible.

I’ve never met one person that was “balanced.” Everyone, absolutely everyone, is weighted in the areas they care more about. We make choices on where to focus our time. That’s natural. That’s good.

Some people weigh their lives towards their kids. They give up their job, their personal dreams, and often their friendships to focus on their kids. These people are not balanced. They are weighted. They have made the decision that the best use of their time is to focus on their kids. That’s their choice.

Other people dedicate their lives to helping others in need. They sacrifice their own family and sometimes their own health for the “greater good.”

Everyone makes sacrifices. Everyone makes choices.

None of these people are balanced because no one is balanced. We all make choices. We all weigh our lives in directions that we think is best. And sometimes we change those weights as we mature. And often we are wrong about the best weights. Balance, while sounding nice, is both impossible and undesirable to achieve.

Balance makes a person mediocre at a lot of things instead of great at only a few.

Culturally, we are pressured to improve in areas of deficiency in the pursuit of an imaginary “balance.” There’s no one out there screaming at us to get better at what we are already good at.

“Self-help” is a $10-billion industry. There are life-coaches, consultants, mentors, business-coaches and the like all helping people improve their personal and professional weaknesses. The reason so many people focus on their weaknesses is that it is much easier for others to point out weaknesses and give some tips on how to improve than to help you get better at your strengths.

Even customary employee performance reviews revolve around identifying areas of weakness in an employee, with the subsequent goal to improve in those areas.

To be one of the best in the world at something, you have to work hard.

While this seems obvious, there are many people who don’t believe it’s true. Many people believe you can become great just working 9 to 5. It’s not clear where this controversy comes from.

It could be a result of the fact that we can’t all agree on how many hours of work really constitute “hard.” Malcolm Gladwell theorizes that it takes 10,000 hours of deliberate practice to become a master at something. But it is not just the hours … it is the obsession that matters.

You cannot be great at something unless you are obsessed with it. You need to be thinking about it all the time. That obsession may consume you and it might not be healthy for you … but that is the difference between the great and the merely good.

Crazy hard workers: every athlete that has achieved remarkable achievements. Think of the athlete you admire and they inevitably worked their butt off.

Think of a great musician and they are spending countless hours practicing. Doing anything worth while is really hard work.

Warren Buffet once famously stated that compound interest is the eighth wonder of the world. Power laws rule much around us, but more so in the technology and business worlds. One fantastic deal, such as Facebook buying Instagram, can shift the bedrock of business everywhere. Despite the common belief that 80% of company acquisitions are failures, the remaining 20% can shape a new path for in that company – the expected value is still enormous and is definitely a worthwhile path if executed properly.

M&A is generally a net positive even though most acquisitions fail.

80% of company acquisitions do not work, but when they do work, they can work spectacularly.

Many people mistake averages for value. Venture capital is exactly the opposite of this: missing the seed round of AirBNB if you had the chance to invest means you would be financially worse off than had you invested in 50 Theranoses. The difference is that in the first case you would make 1000x your investment or at worst 0, so the opportunity cost is immense.

Power Laws also exist in company acquisitions.

The Power Law of Company Acquisitions is why companies continue to make acquisitions. In the few cases it does work, like Google’s purchase of YouTube, the gains can continue to reap dividends decades later. Fundamentally, most of the best acquisitions are contrarian in nature; otherwise, they would have been bought by another company already. And sometimes, like the YouTube acquisition, there are only a few companies that could have acquired it successfully – the key is to stay within your circle of competence.

Exorbitant Salaries don’t make for Exorbitant Lifestyles

Here is an interesting paradox: the world is experiencing the largest bull market in history, but fewer than one out of five Americans feel like they’re living the American Dream. Many of these people have incomes ranging well above six figures, in the vicinity of $200-400k, and still worry about making ends meet.

In 2018, the Department of Housing found that a salary of $117,000 is considered low income in San Francisco. Effectively, making six figures puts one into poverty in SF (if you are taking care of a family). Sadly, this is not a trend isolated to the Bay Area. There is a financial disparity amongst people who are in the top 2% of earners in the U.S. who live in expensive areas, and not because they can’t afford a yacht.

All-together, these families are earning a tremendous salary by any standard (often more than $300k per year), attending the most prestigious graduate schools and coming from upper-middle-class backgrounds. The scariest part is that these are not people you’d expect to be struggling. In fact, if you took and average U.S. family of four and told them that a family who made $300k/yr – the top 2% of income in the U.S. – was struggling, they would laugh hysterically. They would never believe you because the median US salary is $62k. It would be called fake news.

Unfortunately, this story is playing out across the country. Of course, it is not happening everywhere nor is it happening to everyone. It is primarily happening to secular people that have kids and live in ultra-expensive places like New York City, DC suburbs, Bay Area, etc. The inflation rate in those cities for core goods (housing, healthcare, and education) have been growing at a rate of more than 10% a year for the last 10 years. How do these elites manage to keep afloat? The short answer is that they’re not able to and the consequences could have a drastic impact on the future of our nation’s democracy.

Sisyphus’ Hedonic Treadmill

The Elite With No Savings (TEWNS)

A necessary piece of the puzzle requires imagining what these people look like; how fanciful are their lives that they feel like they are working class on $300k a year? People have a tough time believing this because on the surface, The Elite With No Savings (or TEWNS) are doing well. To paint the picture, these are families with two college educated parents, perhaps they met at an Ivy League school, with young kids. They live in expensive cities, far from their parents, while paying off a mortgage. Daycare and expensive schools are a must for these families, eating into their bottom-line and leaving almost nothing for savings.

For the top 2%, life should be different; they played the game well by delaying gratification and they went to a top school while knocking their academic careers out of the park. They passed the Marshmallow Test. Still, many are financially underwater after learning that there’s more to life than just academics.

I plan on writing a lot more about why the Thiel interview question (what is an important truth that most people think is crazy) and why it is so brilliant. In the meantime, here is a tweetstorm with my quick thoughts:

There are three potential "flags" if someone answers the heretical view question with a conventional view:

I used to be worried about asking the Thiel question to candidates because I thought they would give answers that were completely crazy. but it turns out that crazy answers rarely happen — the fear now is of the conventional answer.

Greenland is very strategic territory and becoming more strategic by the day (due to global warming). It is one of most important locations for a military presence. And it would be extremely undesirable (to the U.S.) if a rival country had a significant military presence on Greenland.

But Greenland needs a lot of development. Its 56,000 inhabitants need better resources. While the average Greenlander has an income of $35,000 (more than half of what an average American makes), it takes a lot of resources to live in a place that has such extreme weather.

Greenland has 56k population.could they hold a Dutch auction for their sovereignty?

seems like $120 billion for Greenland is a pretty good deal for a nation state. and $2M/person would make the population of Greenland the richest per capita in the world.

So here is a modest proposal: Greenland sells itself to the United States.

Yes, the first reaction might be that I’m a jingoistic crazy. But this could be good for every Greenlander.

Imagine selling Greenland to the U.S. for $120 billion (assuming the Danish allow the Greenlanders to make that self-determination). That means that each Greenlander will be worth $2 million — including every adult and child. They could even set up a trust for kids (so the kids, not their parents, have access to the money.

Ideally it should be flipped. Your company should spend the vast majority of its time focusing on things that are unique to your company.

Crazy thought experiment: Imagine a new type of company that decided to only do what it was really good at and essentially outsourced everything else.

Recruiting as a service?

Pretty much every company spends lots of time recruiting. Recruiting is a massive time suck. Yes, some companies do it better than others … but there are a set of best practices that all the good companies eventually master.

What if your company could completely outsource its recruiting (including interviewing) to another service? I know this seems completely crazy … but imagine if that could happen. Imagine the time savings.